Rates

Types of mortgage rate today

There are different types of mortgage products offering fixed rates. There are tracker rates, variable rates – you need to know which is the best rate for you.

Mortgage rates come in three main types:

1. Fixed Mortgage Rates

With a fixed-rate mortgage, your interest rate is fixed for a period of time, typically 2, 3, 5 or 10 years. Fixed-rate mortgages will generally come with a ‘lock-in’ where you incur a penalty if you repay the mortgage within the fixed-rate period.

2. Variable Mortgage Rates

Variable rates are set by the mortgage lender and are subject to change by the mortgage lender at any time. Variable-rate mortgages generally do not have a lock-in.

3. Tracker Mortgage Rates

Tracker mortgages follow a main mortgage rate as it moves up and down. For example, your tracker mortgage product could be set to be 2% above Bank of England base rate.

Some tracker mortgages follow the bank’s own base rate, or the LIBOR rate. Tracker mortgages will often have a lock-in with an early redemption penalty if you repay the mortgage in the short term.

How to find the lowest mortgage rates

When assessing a mortgage rate, the borrower typically looks for which rate is available but this is not a straightforward comparison of rates: other factors need to be considered.

• Product Fees
• Valuation Fees
• Early Repayment Charges
• Legal Costs

Acceptability to the mortgage lender

Which lenders will offer you lending given your circumstances? Is there something particular about your case that means only certain mortgage lenders will offer? You can only assess the lowest mortgage rate available once you know which lenders can be considered.

Changing mortgage rates

The lowest mortgage rates change daily, and most lenders revamp their rates at least once a month. Therefore, if you see a rate that you feel is suitable for you today, you need to take action swiftly or risk losing the rate.

Your mortgage broker can often secure a mortgage rate for you for later use

Eligibility

Assessing mortgage rates today can only be accurate if you understand your eligibility and which lenders would consider your case. This is where the services of an independent mortgage broker are key.

Mortgage costs

Mortgage rates and products typically come with additional costs such as valuation fees, booking fees, and arrangement fees. Sometimes, particularly with lower-value mortgages, these additional costs can be a major factor in the overall deal. In these cases, the lowest rate is not necessarily the best one.

Mortgage rate comparison – how does it work?

We are all familiar with the concept of comparison websites where you can assess today’s mortgage rates from a number of providers. These sites however need to be treated with caution.

As stated above, you can only run a true rate comparison once you know which lenders will consider your case. It is not possible to assess that information on a comparison website.

Further, although they give the impression to the contrary, comparison websites do not carry details of all the lenders and products on the market. The comparison websites generate revenue by selling advertising space and enquiry data, and receiving sales commissions from providers listed on the site.

If the mortgage provider does not have a commercial deal with the comparison website, they won’t be listed.

Finding the best buy-to-let rate

Buy-to-let mortgages are a separate area for residential products, and if you are finding the best buy-to-let rate, you need to bear a number of things in mind.

Buy to let mortgage product fees

Mortgage product fees on buy-to-let mortgages can be considerably higher than those charged on residential mortgage products. Do not be put off by mortgage fees however, as it is often the case that the mortgage with the highest product fee is still the best buy-to-let mortgage rate available to you.

Buy-to-let mortgage lenders typically price their products, such as those with high-value mortgages benefit from taking a lower rate higher product fee mortgage. Another important factor is that mortgage product fees can generally be offset against the borrower’s income tax bill making the net cost much lower.

Buy to let rental calculations

Most buy-to-let mortgage lenders assess affordability based on a multiple of the rental income derived from the property. Each lender has their own way of calculating that multiple, and this means that where the ratio between the required mortgage level and rental income is high, borrowing options are limited.

Tenants

Buy to let lenders prefer single tenants or families on an assured short-hold tenancy agreement. Where the prospective landlord intends to have tenants on benefits income, student tenants, or multiple tenants in the same property, the number of buy-to-let mortgage lenders that will consider the case is considerably lower.

Once again, an independent mortgage broker is your best source of finding the best buy-to-let rate.

If you are seeking the best buy-to-let mortgage rate available to you, call us now.

Switch to fix Mortgage Rates

A product which has become available in recent years is the switch to fix product where the lender offers a tracker rate with the option to switch to a fixed rate at any time without penalty.

This can give you the advantage of a competitive pay rate today with the protection of being able to fix your rate later.

Standard Variable Mortgage Rates

When the term of your Fixed or Tracker Rate ends, you will then revert to the lender’s standard variable rate. This is the rate that the majority of borrowers find themselves on.

Although lenders will always offer new, competitive rates for borrowers to move onto, apathy in the market means that the vast majority will tend to stay on their lender’s standard variable rate.

This can be expensive because the standard variable rate is rarely as competitive as other rates offered. We would always recommend that a borrower on a standard variable rate checks out their alternative options across the whole of the market to ensure that they are on the best possible rate.